So Hum Bharat Digital aims to the address the “white spaces” within the customer segment that are currently not addressed and in spending categories where physical cash is still widely used, said Navin Surya one of the promoters the New Umbrella Entity applicant, in an interview with MediaNama .
Surya who is chairman emeritus of the Payments Council of India and chairman of the Fintech Convergence Council joined hands with Infibeam Avenues’ executive director, Vishwas Patel, to start So Hum. While several banks, multinational companies and corporate groups also plan to apply for an NUE license, Surya and Patel are the first to set up an entirely new entity to rival the National Payments Corporation of India (NPCI).
MediaNama: Why do we need more than one umbrella entity for payments?
Navin Surya: There is no single reason why payments has not penetrated beyond the top 100 million consumers. Every consumer segment needs a different value proposition, payments is not necessarily a geographical issue but a demographic issue. As you go down to the next set of customers, the similarities between the customers keep reducing compared to the top 100 million customers who are similar in their behavior. Different people have different needs, different use cases and different ways they transact in the commercial environment. Therefore, there is need for a different kind of ecosystem that needs to be digitised.
Our payments solutions are focused to take the current digital payments customer base from 100 million at present to the next 500-600 million and increasing [the share of digital payments] retail consumption spends from 18% to 50-60%.
MediaNama: If today’s digital payments and banking industry can penetrate only 10-15% of the population, how do you increase access to financial services to the majority of the country ?
Navin Surya: The challenge with the banks is that many customers are inactive. In the next 300-400 million customer segment, most customers get paid in cash, they have a hand-to-mouth existence so money churns out quickly from their account, which means that their connect with a bank is far less and therefore, the relevance of digital payments goes away. So it is a question of how you get to the next set of customers and who are the best partners who have access to these customers.
We need to look at expanding payment services through companies that are well-connected with these customers, beyond the banks, such as micro-finance institutions, health insurance and others like telcos. For every product there is a way to roll it out and the role different ecosystem players can play.
MediaNama: How do you envision So Hum functioning, if granted a license?
Navin Surya: Currently, our thought process is to be an operator of the payments’ platforms and ideally, unless something is critical, not get into the operations of the products. The role of So Hum will be to set up payments platform and create an ecosystem. Just as we have to ensure our platforms and inter-operable with NPCI’s platforms, I think if we create similar platforms or something new which gets approved by the RBI, others will need to interoperate with out platforms as well.
At this stage, a lot of the work is on the thought-process and we will be working closely with our partners, advisors and consultants through a collaborative manner. We can expect the NUE(s) to go live somewhere in July 2022, given the timelines set by the RBI.
MediaNama: Who are you targeting as partners and shareholders in So Hum?
Navin Surya: Under the RBI’s guideline, the NUE will need to have minimum paid-up capital of ₹500 crore and at the time of making an application for the licence it should demonstrate that it has a minimum of ₹50 crore of capital. The promoters have committed ₹52 crore as of now and we plan to raise close to ₹600 crore. For the remaining funds we are in touch with some fintech founders, strategic investors like payment companies, fintechs, companies based on the use-case, banks that have a fintech focus and eventually even financial investors.
MediaNama: What should the RBI’s approach be between the NPCI and another umbrella entity? a
Navin Surya: Regulations cannot be entity-wise, irrespective of whether you are new or old, as there has to be a level-playing field. The specific challenge I foresee is how new payments products will have to fit into existing regulations. In the case of NPCI, when they introduce a change in UPI they need RBI approval,Regulations today are based on a hierarchy and since the NUE will operate under conditions set by the RBI, it will need take approval from the RBI whenever a new payments solution is launched. So it is not necessary that the regulations are restricted to the platform level and not the product level. You will have both.
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(Updated March 13, 2021 6:56 pm). Updated based on Editorial Direction. Originally Published on November 19, 2020.